Netflix headwinds persists
The video streaming giant Netflix reports earnings tonight after the US market close and analysts expect revenue growth of 5% y/y and EPS of $2.22 down 23% y/y as rising input costs are pressuring Netflix’s business. The strong demand during the pandemic has disappeared, competition has increased significantly, and content production has been weak running at higher costs than estimated. The key upside factor for Netflix is the new ad-tiered business model which will enable a new revenue stream and reduce the risk of subscribers cancelling their subscriptions due to the cost-of-living crisis.
The semiconductor party is coming to an end for ASML
ASML, the world’s largest and most important semiconductor equipment manufacturer, reports Q3 earnings tomorrow morning before European trading opens. Revenue growth is expected to decline to just 1.6% y/y from 35% y/y in Q2. While we believe ASML will meet expectations for operating income and revenue we are more worried about orders as the ongoing tensions between the US and China over semiconductors are negatively impacting the industry. The US has imposed several export restrictions on semiconductors and equipment to China and the full-speed realignment of semiconductors will hit industry growth in the short-term. We have recent seen negative outlook on semiconductors from Samsung and Micron Technology. As the ninth largest European publicly listed company this earnings release will be important for sentiment in European equities.